Pinnacle Foods Ipo

efflorescence Foods Inc. initial earthly concern Offering MACKK Consulting Group BSAD 444. 20 April 1st, 2013 alliance History big top Foods Group is a food advancement play along specializing in shelf stable and frozen food categories. The attach to was formed in 1998 as Vlasic Foods International, acquiring some(prenominal) food-manufacturing brands such as Swanson TV dinners and Open Pit from the Campbell Soup Company. apexs portfolio of iconic brands dates back in existence to the 1800s. The earliest brand owned by raising Foods, Armour Star, has existed since 1867 when Philip Armour founded it as Armour and Company.Armour was the first federation to produce stomachned meat and was once Chicagos nigh important business, helping to make the city and its stockyards the center of the American meat-packing business industry. Throughout the late 1800s and 1900s, iconic brands such as Duncan Hines, Log Cabin, aunty Jemima and Hungry Man were introduced and now are a p art of the cover Foods name. Pinnacle Foods acquired cockcrow Foods in 2003 when the companys health was in jeopardy collectible to lawsuits in 2001.Ian Wilson, a former executive with Coco-Cola, founded Aurora Foods in 1995 using the company to purchase Van de Kamp Seafood from Pillsbury along with several new(prenominal)wise brands. As a result of major lawsuits in 2001, Wilson and other Aurora executives plead guilty to securities fraud for misrepresentation of the companys monetary statements. Jim Smith replaced Wilson as CEO of Aurora Foods until 2002, at which time motions were set in place that lead to Pinnacles eruditeness of Aurora. Pinnacle closed Auroras Missouri offices and moved them to ruby Hill, newfangled Jersey where the currently remain.In 2007 The Blackstone Group, a New York City hidden legality regular, bought Pinnacle Foods for $2. 16 billion (G. S. , 2007). Since then, Pinnacle Foods has acquired Birds Eye Foods, Inc. , adding a mix of frozen and specialty brands to its already iconic portfolio. Industry Overview * Ashley Company Overview Today Fortune Magazine ranks Pinnacle in the Top 1,000 Companies with oer 4,000 employees. Pinnacles products can be found in more(prenominal) than 85% of American households and are leaders in their respective categories, dimension the first or second market share position in 10 of the 12 of the categories in which they compete.Pinnacle currently focuses on growing their lead brands while reinvigorating their foundation brands. Their leadership brands are those with the most potential for egression and innovation. These include brands such as Vlasic, Duncan Hines, and Ms. Butter-Worths. Pinnacle prides themselves on desolelying category breakthroughs with these brands. These leash brands are utilize prominently in marketing campaigns that celebrate their naughty vitality. Pinnacles foundation brands are those that al wiped out(p) a immobile and recognizable reputation in most hous eholds.Families already know and delight in these brands such as Aunt Jemima Frozen Breakfast, Open Pit, and Hungry-Man. Pinnacle strives to chevy the bar with these familiar foods through new flavours and health benefits. Pinnacle essential be innovative with these familiar brands to ensure they remain as usual as they currently are. Financial Overview Financially, Pinnacle has experienced minimal proceeds over the finale year. Net sales increased marginally from $2. 47 billion in 2011 to $2. 48 billion in 2012 and in labor union America specifically, net sales grew a meager 1% from $2. 07 to $2. 08 billion.EBIT was $284 zillion in 2012, after giving effect to $66 trillion in pre-tax charges related to restructuring and refinancing. This restructuring also impacted net fee, as Pinnacle had to redeem $51 million in after-tax charges and was left with $53 million in net earnings. Despite these charges, this net income shows a strong recovery from 2011 when the company suff ered a net loss of $47 million. Total capital white plagues were $78 million in 2012, down from $117 million in 2011. These expenditures include memorial consolidation. A summary of these figures can be seen below in establish 1. edge 1 Pinnacle Financial Statements It can be seen in screening 1 that Pinnacle has a substantial core of acquisition, merger and other restructuring charges. These charges are primarily related to Pinnacle closing facilities in Washington, New York, Wisconsin, and Delaware. A complete breakdown of these expenditures has been included in exhibit 2. Exhibit 2 Acquisition, merger, and other restructuring charges One of the problems that Pinnacle currently faces is their large amount of debt. They have roughly $550 million of a term give that is referable in 2014.This resulted in Pinnacle entering the market with a $ three hundred million incremental term loan last year, dubbed F, with proceeds to be utilize to help repay the $550 million. Pinnacle h as an additional $400 million E term loan that was syndicated earlier in 2012. This loan matures in October 2018 and is covered by a 101 soft call agio until April 17, 2013. Proceeds from that deal were used to issue $199 million in 10. 625% subordinated notes collectable in 2017. Altogether Pinnacle has about $641 million outstanding under the extended term loan due in 2016 (Bisbey, 2012).This is one of the old reasons for Pinnacles initial public offering, as result be discussed later in the report. The balance sheet below summarizes Pinnacles debt obligations as s easily as their assets and equity. Exhibit 3 Pinnacles Balance tag for 2011 and 2012 After playing a two-finger analysis of this balance sheet it can be concluded that Pinnacle has not made any drastic changes over the past two old age. Assets have decreased slightly but that was coupled with a decrease in liabilities by roughly the analogous amount which is reasonable.Exhibit 4 is a portion of Pinnacles fu nds flow statement that helps explain these changes in the balance sheet. Pinnacles cash flows from financing increased 212% between 2011 and 2012, the vast majority of this expenditure being the repayment of debt. By making a procedure of loan repayments, Pinnacle decreased their cash and therefore their assets, while also simplification their liabilities. Exhibit 4 Cash Flows from Financing Activities Ratio 2012 2011 come down on Equity 5. 9% -5. 54% Return on Assets 1. 19% -1. 05% Return on Sales 11. 46% 7. 4% Current Ratio 2. 11 2. 17Quick Ratio 1. 04 1. 17 Debt-to-Equity Ratio 3. 95 4. 26 Exhibit 5 2012 Ratio Analysis of Pinnacle Group Inc. These ratios initial public offering The food-industry sector is changing due to increased globalization, vertical integration, and mergers and acquisitions. This is forcing many debaucheds to wait on to alternatives to debt financing in order to keep up with the competition. The public equity market is a valuable option in financin g the harvest-time necessary to survive amongst competitors, as it offers access to more equity capital than could be attained from other sources (Stegelin & Houston, 2007).With millions of dollars in debt obligations coming up due in the following few years, it is understandable that Pinnacle is having an Initial commonplace Offering to raise capital. This follows suit with research that has shown that as a food-industry firms leverage ratio increases, the likelihood of an initial public offering increases as well (Stegelin & Houston, 2007). It has also been noted that the probability of a food-industry firm IPO decreases with the firms size and age (Stegelin & Houston, 2007). Pinnacle is currently 15 years old which is incredibly young compared to industry leaders Kraft and Kellogg which are two over 100 years old.This could be a add factor to why they are wanting to go public. This IPO will follow 13 other offerings in 2013 backed by financial sponsors such as private-equit y firms. These 13 other offerings can be used to loosely predict the conquest of Pinnacles IPO, as Pinnacle is backed by private-equity firm Blackstone. These IPOs were boffo, seeing an modal(a) first-day gain of 22% and are up an average of 21% from their listing dates. These results are declare in comparison to 30 other IPOs at large, showing an average 15% first-day gain and a gain of 19% from the listing dates (Driscoll, M. 2013). another(prenominal) important benchmark is the IPOs of other food sellers. There were mixed results regarding the success of food seller IPOs in 2012. The health food sector showed personnel with natural food companies Annies Inc. , Natural Grocers by Vitamin Cottage Inc. , and WhiteWave Foods Co. performing well since their IPOs. Annies shares have more than doubled since being listed last March while the value of Natural Grocers has risen over 40% since their listing in July (Driscoll, M. , 2013). On the other hand, Roundys Inc. and Amira Nature Foods Ltd. have underperformed since their IPOs.Roundys is a Midwestern supermarket chain and Amira is a rice seller, both of which are down about 20% from their offerings in October and February respectively (Driscoll, M. , 2013). Since Pinnacle offers processed, packaged foods, benchmarking their success from the natural, organic food IPOs is not very genuine. With state becoming more and more health conscious these days, it is not move that these health food companies found success in their IPOs. Although Pinnacle does stand the frozen vegetable brand Birdseye, they also carry a number of brands that would not be classified as healthy.Of the aforementioned companies, the most reliable comparison for Pinnacle would likely be with Roundys, the supermarket chain. Supermarkets sell a liberal variety of processed and pre-packaged foods, and are the medium through which Pinnacles brands are sold. However, there is still not a strong correlation between the two firms. On March 27 th, 2013, Pinnacle announced their Initial Public Offering of 29,000,000 shares of ballpark stock at $20 per share. Pinnacle also granted the underwriters a 30-day option to purchase an additional 4,350,000 shares at the IPO price.It is estimated that Pinnacle will raise net proceeds of about $545. 2 million after subtracting underwriting costs. Pinnacle plans to use the entirety of these earnings to pay off some of their debt. They plan to redeem $465 million in aggregate principal amount of 9. 25% Senior Notes due in 2015 at a redemption price of 100%. The remainder of their IPO proceeds, along with some cash on hand, will be used to repay $119 million of the senior secured term loan B induction maturing in April 2014. IPO Success Pinnacle Foods had a very successful IPO on March 28, 2013.The company issued a check of 33,350,000 shares of common stock, including the entirety of the additional 4,350,000 shares that the underwriters had the option to purchase. Pinnacle now has a total of 117. 2 million common shares outstanding. Net of all underwriting discounts, Pinnacle elevated $627 million through this offering, which is $81. 8 million more than they had initially anticipated. Pinnacle will couple this money with $40 million of cash on hand to pay down $667 million in outstanding debt. quite of their initial plans of repaying $119 million of their term loan B due next April, they will repay $202 million.Exhibit 6 Pinnacle Foods Stock Performance Since IPO as Compared to S&P 500 As can be seen in Exhibit 6, Pinnacle shares (blue line) seem to be experiencing steady gain since their IPO on March 28, 2013. This is especially positive since the S&P 500 (brown line) seems to be doing quite the opposite. Pinnacle shares have increased from their low of $22. 15 to a high of $24. 61, an 11% increase. References Driscoll, M. (2013, Mar 25). Pinnacle is hoping investors bump hungry. Wall Street Journal. Retrieved from http//search. proquest. com/docview/13191 82111? accountid=13803 G. , S. S. (2007).Black stone Chows Down On Pinnacle Foods Group. (cover story). elevated Yield Report, 18(7), 1-15. Stegelin, F. , & Houston, J. (2007). Factors Influencing the Initial Public Offering (IPO) Decision of Food dissemination Firms. Journal Of Food Distribution Research, 38(1), 215-216. Stratton, K. (2012). Pinnacle Foods Group Gets 55,000SF Update in Parsippany. National Real Estate Investor Exclusive Insight, 8. Bisbey, A. (2012). Pinnacle Foods Shopping $300M incremental TL. High Yield Report, 23(34), 28. PRNewswire (2013, Apr 3). Pinnacle Foods Inc. Announces Successful Closing of its Initial Public Offering. ttp//investors. pinnaclefoods. com/phoenix. zhtml? c=223400&p=irol-newsArticle&ID=1803206&highlight= PRNewswire (2013, Mar 6). Pinnacle Foods Finance LLC Reports stern Quarter Fiscal 2012 Results. http//investors. pinnaclefoods. com/phoenix. zhtml? c=223400&p=irol-newsArticle&ID=1795035&highlight= Business fit (2013, Mar 27). Pinnacle Foods Inc. Announces Pricing of its Initial Public Offering. http//investors. pinnaclefoods. com/phoenix. zhtml? c=223400&p=irol-newsArticle&ID=1801326&highlight= http//www. rttnews. com/2088372/pinnacle-foods-raises-net-proceeds-of-627-mln-i